London midday: Stocks in the black as BoE stands pat on rates
London stocks were still a little firmer just after midday on Thursday after the Bank of England surprised markets by standing pat on interest rates.
The FTSE 100 was up 0.3% at 7,271.31, while sterling was down 0.3% against the dollar at 1.3649, having already been weaker before the Bank’s announcement.
The BoE voted 7-2 to keep its base rate unchanged at a record low of 0.1%. Many analysts had been expecting an increase to 0.25% amid rising inflation. The Bank also left its quantitative easing programme on hold at £895bn, although policymakers Catherine Mann, Dave Ramsden and Michael Saunders were all in favour of a cut.
Giles Coghlan, chief currency analyst at HYCM, said: "Just like the US Federal Reserve yesterday, the BoE has decided to hold fire on a rate rise. This dovish decision is more of a surprise though; speculation had been rife that they would hike rates - evidently the BoE is wanting more time before taking such action.
"There is logic to this. Inflation might be rising, but the BoE is right not to consider an interest rates hike as a silver bullet to this problem. Labour data is crucial, and by deciding to postpone hiking rates, the MPC is likely waiting for more jobs data to become available following the end of the furlough scheme.
"Raising rates right now would risk harming businesses’ recoveries. It would also discourage people to spend their pent-up savings. All of this would damage the UK economy’s post-pandemic recovery and could result in ‘stagflation’, where inflation rises but the economy stagnates."
Investors were also mulling a survey out earlier that showed growth picked up in the UK construction industry in October but uncertainties over supplies and prices held up new contracts.
The IHS Markit/CIPS UK construction purchasing managers' index (PMI) rose to 54.6 from 52.6 a month earlier. A reading of 50 marks the difference between growth and contraction.
Housebuilding replaced commercial construction as the best-performing category with a score of 55.4 - the strongest reading for three months. Commercial work also picked up with respondents reporting a boost from looser pandemic restrictions. Civil engineering showed a modest increase.
Customer demand was strong but new orders failed to pick up from September's eight-month low as supply shortages and rising costs made builders hesitant about signing contracts. Purchasing activity increased sharply as builders snapped up goods before projects started. Employment growth also picked up.
In equity markets, BT rallied as it reported a fall in interim profits due to higher finance costs and partially offset by a rise in adjusted core earnings, but reaffirmed its outlook for 2022 and resumed dividend payments.
JD Sport also gained even as the Competition and Markets Authority ordered it to sell Footasylum after an in-depth investigation identified competition concerns.
Electrical retailer Currys surged after it announced a £75m share buyback as group organic sales jumped 15% from pre-pandemic 2019 levels on the back of continued demand for products such as laptops and video games during lockdowns.
Tate & Lyle was up after it reported a rise in first-half profit and revenue following a particularly strong performance in the food & beverage solutions business.
On the downside, Sainsbury's fell even as it stuck to its full-year guidance and reported a 23% increase in first-half profit, boosted by higher grocery sales and cost cuts.
Aveva was knocked lower by a rating downgrade at Barclays, while TI Fluid Systems lost ground as it posted a drop in third-quarter revenues amid chip shortages and supply chain issues.
Unilever and Ashmore were in the red as they traded without entitlement to the dividend.
Market Movers
FTSE 100 (UKX) 7,271.31 0.31%
FTSE 250 (MCX) 23,362.69 1.06%
techMARK (TASX) 4,604.41 0.55%
FTSE 100 - Risers
BT Group (BT.A) 151.05p 6.26%
British Land Company (BLND) 512.00p 3.75%
Land Securities Group (LAND) 701.00p 3.30%
Smith & Nephew (SN.) 1,333.50p 3.17%
Royal Mail (RMG) 452.90p 3.12%
Rolls-Royce Holdings (RR.) 136.22p 2.73%
Taylor Wimpey (TW.) 157.05p 2.71%
Fresnillo (FRES) 900.00p 2.65%
JD Sports Fashion (JD.) 1,109.50p 2.45%
International Consolidated Airlines Group SA (CDI) (IAG) 170.92p 2.25%
FTSE 100 - Fallers
Aveva Group (AVV) 3,427.00p -3.60%
Sainsbury (J) (SBRY) 279.10p -3.39%
Schroders (SDR) 3,587.00p -3.05%
Hargreaves Lansdown (HL.) 1,560.00p -2.38%
Darktrace (DARK) 586.50p -2.25%
NATWEST GROUP PLC ORD 100P (NWG) 219.90p -2.22%
Hikma Pharmaceuticals (HIK) 2,411.00p -2.15%
Pearson (PSON) 596.40p -1.84%
Lloyds Banking Group (LLOY) 49.70p -1.57%
Abrdn (ABDN) 252.00p -1.18%
FTSE 250 - Risers
Currys (CURY) 131.00p 7.20%
IMI (IMI) 1,742.00p 6.94%
Tate & Lyle (TATE) 687.60p 5.95%
Baltic Classifieds Group (BCG) 220.00p 5.77%
NCC Group (NCC) 244.50p 5.62%
Draper Esprit (GROW) 1,032.00p 5.31%
Hammerson (HMSO) 32.94p 5.11%
Electrocomponents (ECM) 1,194.00p 4.92%
TUI AG Reg Shs (DI) (TUI) 243.70p 4.77%
Workspace Group (WKP) 849.00p 3.85%
FTSE 250 - Fallers
Ashmore Group (ASHM) 321.80p -6.56%
Virgin Money UK (VMUK) 186.15p -4.88%
PZ Cussons (PZC) 204.00p -3.32%
Contour Global (GLO) 194.20p -2.90%
Diversified Energy Company (DEC) 106.80p -2.38%
Reach (RCH) 305.50p -2.08%
Direct Line Insurance Group (DLG) 280.20p -1.79%
OSB Group (OSB) 492.20p -1.44%
Tyman (TYMN) 379.00p -1.30%
TI Fluid Systems (TIFS) 266.00p -1.30%